Property law dispute Property damage and business interruption

A commercial legal expenses insurance claim for property damage and business interruption

The firm of solicitors having conduct of this matter for the claimant had been a commercial litigation insurance coverholder with Temple for 10 years. The client had taken out litigation insurance cover under their delegated authority scheme and, importantly, also had access to Temple’s disbursement funding facility.

The case related to the declinature of a claim the claimant had made under a commercial insurance policy it had taken out with the defendant. The insurance, among other things, provided cover for property damage and business interruption.  Due to the claimant’s premises being flooded – caused by construction work taking place on adjacent land – the claimant made a claim on its insurance policy.

The value of the claim was approximately £2.2m and the defendant instructed a firm of loss adjusters to investigate.  The claim under the policy was ultimately declined by the defendant due to alleged material non-disclosure on the proposal form; this was completed either by the claimant or on their behalf when applying for insurance and on renewal.

The defendant’s view was that if the claimant had provided the correct information at the time of renewal they would not have offered terms.  The defendant also believed it was a deliberate and reckless act by the claimant to leave out information that should have been disclosed and provided on the proposal form; therefore it was entitled to avoid the claimant’s policy and retain the premium – which it did.

The claimant’s position was that the information not disclosed was not material to the risks being insured and, to the extent it may have been considered material, the defendant would in any event have offered terms – albeit different terms.

As the claimant went into administration as a direct result of the defendant failing to pay out under the policy it was therefore vital they had a disbursement funding facility to pay for the sizeable disbursements to be incurred in pursuing its claim.

The claimant took out a litigation insurance policy with Temple in August 2017 with a limit of indemnity of £500,000. The premium was based upon the Insured’s Costs or Damages, whichever was the greater at the conclusion of the legal action.  In June 2018 an anti-avoidance endorsement to the policy was agreed to at the request of the claimant for the purposes of assisting it in fending off a threatened security for costs application.

The cover was increased by £350,000 in February 2019, making the total Limit of Indemnity £850,000.

The case was ultimately settled at mediation and it was confirmed that ‘without disbursement funding, this case would not have progressed as far as it did.’  The disbursement loans were repaid in full, together with interest, but Temple agreed to reduce the administration fees and be flexible with respect to the premium in order to help secure a settlement.

If you’d like to discuss anything addressed in this article or find out more about litigation insurance and disbursement funding for your firm please contact Matthew Pascall via email to matthew.pascall@temple-legal.co.uk or call 01483 514428.